What are some of the hottest trends in sustainable investing? After attending the annual conference for US SIF, the Forum for Sustainable and Responsible Investment, in Chicago in May, I’m excited to share a few investment strategies that I think advisors should tune into. These investment opportunities are exciting to clients and help diversify allocation choices across style boxes.
Giving the Next Generation of Farmers a Chance
The panel Investment Opportunities in Sustainable Agriculture was standing room only. As speakers walked us through how young farmers could sign on as farm managers with the option to become owners after 10 years, you could feel the enthusiasm building in the room. The business structures discussed for investing in this space include private equity, public companies, and direct farmland for accredited investors. The common themes across these approaches include sustainable crop and livestock production methods, family farm management, and rising property values for land in production for five years or more.
This new crop of farmers want to work the land and raise their families on a farm—something that is increasingly difficult given the continued concentration in agricultural production: 63% of agricultural sales in the U.S. came from 9% of farms (USDA, 2007 Census of Agriculture). And, 60% of the farmers are 55-years-old or older (Bureau of Labor Statistics).
You can learn more about these investment opportunities at Organic Valley, New island Capital, Iroquois Valley Farms, and Farmland LP.
TIAA/CREF and Barclays Team Up
In the Emergence of Fixed Income in Sustainable Investing breakout panel, TIAA/CREF’s Managing Director was very clear that demand from plan participants for sustainable fixed income investment choices is the driving force behind the partnership with Barclays. Three major sectors of the bond market – Corporates, Municipals and Government/Agency bonds – are being used in ESG/Impact investing strategies as SRI assets surge into the fixed income arena.
According to US SIF’s 2012 Trends Report, TIAA/CREF is among the 450 Institutional Investors that now incorporate ESG criteria in their investment selection process. This group includes many public and private pension and retirement plans. So find out if your clients have qualified retirement plans that include SRI options.
Real Estate/Real Assets
For institutional investors, the Green Real Assets – Public Initiatives and Public Markets panel highlighted that tenant demand for energy efficiency is driving real estate development. The Chief Sustainability Officer, City of Chicago, spoke passionately about how investors can play a role in providing jobs and addressing water, transportation and energy needs in local communities. Other panel members from the US Dept. of Energy and the MacArthur Foundation stressed the importance of public/private partnerships in expanding the market for investment products in green real assets.
In my experience as an advisor and consultant, awareness of and engagement with clients around these trends supports the growth of AUM and the equity value of advisor practices. Clients like to invest with their values and diversify to reduce risk. By keeping up with the SRI trends, you can distinguish yourself from the competition.
You should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing.